What is Quantitative Easing and how does it affect markets?

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    15-Jul-2015

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<p>Its My Idea!</p> <p> What is Quantitative Easing and how does it affect markets? </p> <p>How does QE work?The term quantitative easing (QE) describes a form of monetary policy used by central banks to increase the supply of money in an economy when the central bank interest either at, or close to, zero.</p> <p>Fed supplies money to banksBanks supplies specified bond instruments In QE US Fed would buy the designated bonds from the US banks in exchange for cash US Dollars</p> <p>Fed supplies money to banksBanks supplies designated bond instruments </p> <p>Banks lend the funds to consumers and businessQE is intended to improve the flow of credit in the economy by flushing the banking system with fundsSide Effects of QE</p> <p>Banks &amp; FI lends money to hedge funds &amp; clients who in turn speculate on asset marketsQE can improve credit flow in the system. But that credit could be directed more towards speculative assets and less to real economy</p> <p>Effect of QE on various assets</p> <p>The 8 major central banks of the world have nearly doubled their balance sheet through various quantitative easing programs that is equivalent to a liquidity infusion of nearly 7/8 trillion USD over last 52 months!</p> <p>Post QE1: Brent gained 125%, Gold gained 41% &amp; Silver gained 63%</p> <p>Post QE2: Brent gained 84%, Gold gained 65% &amp; Silver gained 183%</p> <p>Effect of QE on various assetsWhy QE might not help real economy</p> <p>Fed supplies money to banksBanks supplies specified bond instruments Liquidity Trap </p> <p>Fed supplies banks with cash but banks do not lend to consumer or business, as banks are risk averse +++ Banks are saddled with bad loansREAD MOREThank You!TwitterWebsiteFacebook</p> <p>Registered office: Kotak Securities Limited, 1st Floor, Bakhtawar, 229, Nariman Point, Mumbai - 400021. Correspondance Address :Kotak Securities Limited, Infinity IT Park, Bldg. No 21, Opp Film City Road, A K Vaidya Marg, Malad (East), Mumbai 400097. Tel no :66056825. SEBI Registration No: NSE INB/INF/INE 230808130, BSE INB 010808153/INF 011133230/INE 011207251, OTC INB 200808136, MCXSX INE 260808130. </p> <p>Disclaimer: Investments in securities are subject to market risks, please read the SEBI prescribed Combined RDD prior to investing. Our research should not be considered as an advertisement or advice, professional or otherwise. The investor is requested to take into consideration all the risk factors including their financial condition, suitability to risk return profile, and the like and take professional advice before investing.Our research should not be considered as an advertisement or advice, professional or otherwise. The investor is requested to take into consideration all the risk factors including their financial condition, suitability to risk return profile, and the like and take professional advice before investing. Derivatives are a sophisticated investment device. The investor is requested to take into consideration all the risk factors before actually trading in derivative contracts. Please note that the views disclosed in the Tweetinar are general in nature and the viewer is requested to take professional advice before investing. </p>

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